-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HbKwpJudwFFmjEqfDVwPieQf/NRkXirw//kmRGr20uXfnM5o9ZjoxtsCPPgDjI5F m4kn9hY89JeU0VA72h4YFw== 0000743872-99-000016.txt : 19991118 0000743872-99-000016.hdr.sgml : 19991118 ACCESSION NUMBER: 0000743872-99-000016 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOMESTAKE MINING CO /DE/ CENTRAL INDEX KEY: 0000743872 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 942934609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-08736 FILM NUMBER: 99759524 BUSINESS ADDRESS: STREET 1: 650 CALIFORNIA ST STREET 2: 9TH FL CITY: SAN FRANCISCO STATE: CA ZIP: 94108-2788 BUSINESS PHONE: 4159818150 MAIL ADDRESS: STREET 1: 650 CALIFORNIA ST CITY: SAN FRANCISCO STATE: CA ZIP: 94108-2788 10-Q/A 1 AMENDMENT 1 TO 10Q FOR JUNE 30, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (Amendment No. 1) (x) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly Period Ended June 30, 1999 ( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _______ to ________ Commission File Number 1-8736 HOMESTAKE MINING COMPANY A Delaware Corporation IRS Employer Identification No. 94-2934609 650 California Street San Francisco, California 94108-2788 Telephone: (415) 981-8150 http://www.homestake.com Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ ----------- The number of shares of common stock outstanding as of July 31, 1999 was 260,227,000.* * Includes 6,994,000 Homestake Canada Inc. exchangeable shares that may be exchanged at any time for Homestake common stock on a one-for-one basis. HOMESTAKE MINING COMPANY AND SUBSIDIARIES Form 10-Q/A Amendment No. 1 The undersigned registrant hereby amends its quarterly report on Form 10-Q for the quarterly period ended June 30, 1999 to revise Note 10 (entitled Homestake Canada Inc. "HCI") to the condensed consolidated financial statements. On April 29, 1999 Homestake Mining Company acquired Argentina Gold in a business combination accounted for as a pooling of interests and transferred its investment in Argentina Gold to HCI in exchange for an intercompany note. Note 10 to the condensed consolidated financial statements has been revised to reflect the difference between the historical cost basis and fair value of the equity of Argentina Gold at the date of transfer as a reduction to HCI's shareholders' equity. A revised Item 1, Financial Statements, of Part I of the Form 10-Q is hereby submitted in its entirety. 2 HOMESTAKE MINING COMPANY AND SUBSIDIARIES PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements A. Condensed Consolidated Balance Sheets (unaudited) (In thousands, except per share amount)
June 30, December 31, 1999 1998 ---------------- ---------------- ASSETS Current Assets Cash and equivalents $ 167,630 $ 147,519 Short-term investments 83,127 154,346 Receivables 41,181 45,929 Inventories: Finished products 15,011 13,312 Ore and in process 44,381 39,465 Supplies 24,056 26,129 Deferred income and mining taxes 19,028 22,792 Other 9,128 5,105 ---------------- ---------------- Total current assets 403,542 454,597 ---------------- ---------------- Property, Plant and Equipment - at cost 2,644,178 2,525,793 Accumulated depreciation, depletion and amortization (1,519,608) (1,423,054) ---------------- ---------------- Property, plant and equipment - net 1,124,570 1,102,739 ---------------- ---------------- Investments and Other Assets Noncurrent investments 10,054 12,945 Other assets 67,399 81,616 ---------------- ---------------- Total investments and other assets 77,453 94,561 ---------------- ---------------- Total Assets $ 1,605,565 $ 1,651,897 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 34,624 $ 43,457 Accrued liabilities: Payroll and other compensation 27,779 31,587 Reclamation and closure costs 23,295 23,206 Other 29,901 23,317 Unrealized (gain) loss on foreign currency exchange contracts (28) 24,003 Income and other taxes payable 2,066 3,151 ---------------- ---------------- Total current liabilities 117,637 148,721 ---------------- ---------------- Long-term Liabilities Long-term debt 304,542 357,410 Other long-term obligations 167,878 168,178 ---------------- ---------------- Total long-term liabilities 472,420 525,588 ---------------- ---------------- Deferred Income and Mining Taxes 243,785 230,567 Minority Interests in Consolidated Subsidiaries 7,167 7,825 Shareholders' Equity Capital stock, $1 par value per share: Authorized - Preferred: 10,000 shares; no shares outstanding - Common: 450,000 shares Outstanding - HCI exchangeable shares: 1999 - 6,998; 1998 - 11,139 - Common: 1999 - 253,212; 1998 - 247,483 253,212 247,483 Other shareholders' equity 511,344 491,713 ---------------- ---------------- Total shareholders' equity 764,556 739,196 ---------------- ---------------- Total Liabilities and Shareholders' Equity $ 1,605,565 $ 1,651,897 ================ ================
See notes to condensed consolidated financial statements. 3 HOMESTAKE MINING COMPANY AND SUBSIDIARIES B. Condensed Statements of Consolidated Operations (unaudited) (In thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30, 1999 1998 1999 1998 -------------- -------------- -------------- -------------- Revenues Gold and ore sales $ 169,076 $ 210,687 $ 328,303 $ 405,026 Sulfur and oil sales 5,345 5,665 9,196 11,798 Interest income 3,629 5,282 7,792 9,558 Other income 21,290 (26,284) 32,663 (14,790) -------------- -------------- -------------- -------------- 199,340 195,350 377,954 411,592 -------------- -------------- -------------- -------------- Costs and Expenses Production costs 123,786 142,749 232,573 278,306 Depreciation, depletion and amortization 36,197 37,402 67,859 73,492 Administrative and general expense 10,549 11,538 21,746 24,177 Exploration expense 11,651 13,370 21,112 24,634 Interest expense 4,073 5,216 8,618 10,328 Business combination and integration costs 3,476 17,934 4,764 20,710 Write-downs and other unusual charges 3,500 13,061 3,500 21,940 Other expense 1,795 419 2,381 798 -------------- -------------- -------------- -------------- 195,027 241,689 362,553 454,385 -------------- -------------- -------------- -------------- Income (Loss) Before Taxes and Minority Interests 4,313 (46,339) 15,401 (42,793) Income and Mining Taxes (4,549) 4,878 (17,021) (2,342) Minority Interests 352 (1,688) 787 (5,616) -------------- -------------- -------------- -------------- Net Income (Loss) $ 116 $ (43,149) $ (833) $ (50,751) ============== ============== ============== ============== Net Income (Loss) Per Share - Basic and Diluted $ 0.00 $ (0.19) $ (0.00) $ (0.22) ============== ============== ============== ============== Average Shares Used in the Computation 260,084 229,107 259,641 228,907 ============== ============== ============== ============== Dividends Paid Per Common Share $ 0.05 $ 0.05 $ 0.05 $ 0.05 ============== ============== ============== ==============
See notes to condensed consolidated financial statements. 4 HOMESTAKE MINING COMPANY AND SUBSIDIARIES C. Condensed Statements of Consolidated Cash Flows (unaudited) (In thousands)
Six Months Ended June 30, 1999 1998 -------------- -------------- Cash Flows from Operations Net loss $ (833) $ (50,751) Reconciliation to net cash provided by operations: Depreciation, depletion and amortization 67,859 73,492 Write-downs 3,500 13,061 Gains on asset disposals (851) (1,854) Deferred taxes, minority interests and other 7,890 (19,548) Effect of changes in operating working capital items (29,942) 48,465 -------------- -------------- Net cash provided by operations 47,623 62,865 -------------- -------------- Investment Activities Decrease (increase) in short-term investments 73,287 (11,231) Capital additions (35,634) (33,873) Proceeds from asset sales 2,095 7,841 Decrease (increase) in restricted cash 11,816 (429) Other - 542 -------------- -------------- Net cash provided by (used in) investment activities 51,564 (37,150) -------------- -------------- Financing Activities Borrowings 101,008 - Debt repayments (162,012) (8,083) Dividends paid (12,085) (11,933) Common shares issued 6,707 1,038 Other - 2,531 -------------- -------------- Net cash used in financing activities (66,382) (16,447) -------------- -------------- Effect of Exchange Rate Changes on Cash and Equivalents (12,694) (2,197) -------------- -------------- Net Increase in Cash and Equivalents 20,111 7,071 Cash and Equivalents, January 1 147,519 128,890 -------------- -------------- Cash and Equivalents, June 30 $ 167,630 $ 135,961 ============== ==============
See notes to condensed consolidated financial statements. 5 Homestake Mining Company and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) 1. General Information The condensed consolidated financial statements include Homestake Mining Company and its majority-owned subsidiaries, and their undivided interests in joint ventures (collectively, "Homestake" or the "Company") after elimination of intercompany amounts. The information furnished in this report reflects all normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods. Results of operations for interim periods are not necessarily indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto, which include information as to significant accounting policies, in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. All dollar amounts are in United States dollars unless otherwise indicated. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires that all derivatives be recognized as assets or liabilities and be measured at fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivatives and whether they qualify for hedge accounting as either a fair value hedge or a cash flow hedge. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows of the hedging instruments and the hedged items. SFAS 133 is effective for fiscal years beginning after June 15, 2000 but earlier adoption is permitted. The Company believes that under SFAS 133, changes in unrealized gains and losses on Homestake's foreign currency contracts will qualify for hedge accounting and be deferred in other comprehensive income. However, there are many complexities to this new standard and the Company currently is evaluating the impact that SFAS 133 will have on reported operating results and financial position and has not yet determined whether it will adopt earlier than January 1, 2001. 2. Acquisitions On April 29, 1999, Homestake completed the acquisition of Argentina Gold Corp. ("Argentina Gold"), a publicly-traded Canadian gold exploration company, by an exchange of common stock for common stock. Homestake issued 20.8 million common shares to acquire all of the shares of Argentina Gold based on an exchange ratio of 0.545 Homestake common shares for each share of Argentina Gold. The transaction has been accounted for as a pooling of interests and accordingly, Homestake's consolidated financial statements include Argentina Gold for all periods. Argentina Gold's principal asset is its 60% interest in the Veladero property located in northwest Argentina along the El Indio gold belt. The Company recorded business combination expenses of $3.5 million and $4.8 million, in the three and six month periods ended June 30, 1999, respectively, related to this transaction. Combined and separate preacquisition results for Homestake and 6 Homestake Mining Company and Subsidiaries Argentina Gold for the three months ended March 31, 1999 and for the three and six months ended June 30, 1998 are as follows (in thousands):
Argentina Homestake Gold Historical Historical (a) Combined -------------------------------------------------------------- Three months ended March 31, 1999: Revenues $ 178,533 $ 81 $ 178,614 Net income (loss) 2,198 (3,147) (949) Three months ended June 30, 1998: Revenues $ 195,285 $ 65 $ 195,350 Net loss (30,931) (12,218) (43,149) Six months ended June 30, 1998: Revenues $ 411,502 $ 90 $ 411,592 Net loss (37,517) (13,234) (50,751) Shareholders' equity: at March 31, 1999 $ 737,843 $ 6,526 $ 744,369 at December 31, 1998 735,832 3,364 739,196 at June 30, 1998 604,748 2,336 607,084 a) The Argentina Gold historical results of operations have been adjusted to reflect i) United States generally accepted accounting principles and the format, classifications and accounting policies utilized by Homestake, and ii) translation into U.S. dollars using the average exchange rate for each period. Shareholders' equity has been translated into U.S. dollars using the end-of-period exchange rates.
On April 30, 1998 Homestake acquired Plutonic Resources Limited ("Plutonic"), a publicly-traded Australian gold producer, by an exchange of common stock for common stock. Homestake issued 64.4 million common shares to acquire Plutonic based on an exchange ratio of 0.34 Homestake common shares for each Plutonic share. The business combination with Plutonic was accounted for as a pooling of interests. Business combination and integration costs of $17.9 million and $20.7 million related to this acquisition were recorded in the three and six months ended June 30, 1998, respectively. 7 Homestake Mining Company and Subsidiaries 3. Other Income
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ------------------------ (in millions) 1999 1998 1999 1998 ---------- ----------- ---------- ----------- Gains on asset disposals $ 0.7 $ 1.6 $ 0.9 $ 1.9 Gain on sales of Rabbi Trust investments 0.4 0.3 0.4 4.3 Royalty income 0.5 0.6 1.1 1.2 Foreign currency contract gains (losses) 9.0 (26.5) 16.9 (22.4) Foreign currency exchange gains (losses) on intercompany advances 8.9 (4.4) 10.2 (3.5) Other foreign currency gains (losses) (0.5) 0.4 (0.3) 0.5 Other 2.3 1.7 3.5 3.2 ---------- ----------- ---------- ----------- $ 21.3 $(26.3) $ 32.7 $(14.8) ========== =========== ========== ===========
4. Write-downs and Other Unusual Charges During the second quarter of 1999, the Company determined that further participation in an exploration joint venture in Eastern Europe was unwarranted. As a result, Homestake recorded a write-down of $3.5 million related to the carrying value of this investment. Write-downs and other unusual charges for the three and six months ended June 30, 1998 include $13.1 million to write down exploration properties, including $10.2 million related to property of Argentina Gold. Write-downs and other unusual charges for the six months ended June 30, 1998 also includes $8.9 million related to the first quarter of 1998 restructuring of the Homestake mine in South Dakota. 5. Comprehensive Income (Loss)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ---------------------------- (in thousands) 1999 1998 1999 1998 ------------- -------------- ------------ ------------- Net Income (Loss) $ 116 $ (43,149) $ (833) $ (50,751) Other Comprehensive Income (Loss) Currency translation adjustments 18,104 (33,160) 28,287 (27,401) Unrealized losses on securities (5) (1,154) (40) (3,448) ------------- -------------- ------------ ------------- Total Other Comprehensive Income (Loss) 18,099 (34,314) 28,247 (30,849) ------------- -------------- ------------ ------------- Comprehensive Income (Loss) $ 18,215 $ (77,463) $27,414 $ (81,600) ============= ============== ============ =============
8 Homestake Mining Company and Subsidiaries 6. Long-term Debt
June 30, December 31, (in thousands) 1999 1998 -------------------------------------- Convertible subordinated notes (due 2000) $ 147,640 $ 150,000 Pollution control bonds: Lawrence County, South Dakota (due 2032) 38,000 48,000 State of California (due 2004) 17,000 17,000 Cross-border credit facility (due 2003): Canadian dollar-denominated borrowings 101,902 - Australian dollar-denominated borrowings - 142,410 -------------------------------------- $ 304,542 $ 357,410 ======================================
During the first six months of 1999, the Company repurchased convertible subordinated notes having a principal amount of $2.4 million and repaid all Australian dollar-denominated borrowings under the cross-border credit facility (the "credit facility"). The Company also borrowed C$150 million under the credit facility. In addition, $10 million of the South Dakota Waste Disposal Bonds were repaid from funds held in trust. Borrowings outstanding at June 30, 1999 under the credit facility consist of the Canadian dollar-denominated borrowings of C$150 million. Interest on the Canadian dollar borrowings is payable quarterly and is based on the Bankers' Acceptance discount rate plus a stamping fee. At June 30, 1999 this interest rate was 5.71%. The Company has classified the balance of the convertible subordinated notes, which mature on June 23, 2000, as long-term debt since the Company has the ability under the credit facility, and the intent, to refinance these obligations for a period longer than one year from June 30, 1999. 7. Foreign Currency, Gold and Other Commitments Foreign Currency Contracts Under the Company's foreign currency protection program, the Company has entered into a series of foreign currency option contracts which establish trading ranges within which the United States dollar may be exchanged for foreign currencies by setting minimum and maximum exchange rates. 9 Homestake Mining Company and Subsidiaries At June 30, 1999 the Company had foreign currency option contracts outstanding as follows:
Expected Maturity or Transaction Date Total or US$ in millions 1999 2000 2001 Average ---------- ---------- --------- ----------- Canadian $ / US $ option contracts: US $ covered $61.4 $93.4 $59.1 $213.9 Written puts, average exchange rate (1) 0.68 0.69 0.66 0.68 US $ covered $61.4 $93.4 $63.1 $217.9 Purchased calls, average exchange rate (2) 0.71 0.72 0.69 0.71 US $ covered $50.8 $93.4 $35.2 $179.4 Purchased puts, average exchange rate (3) 0.65 0.65 0.65 0.65 Australian $ / US $ option contracts: US $ covered $76.4 $94.1 $23.0 $193.5 Written puts, average exchange rate (1) 0.65 0.65 0.60 0.64 US $ covered $76.4 $94.1 $23.0 $193.5 Purchased calls, average exchange rate (2) 0.67 0.66 0.63 0.66 US $ covered $60.5 $83.2 $12.0 $155.7 Purchased puts, average exchange rate (3) 0.63 0.63 0.61 0.63 (1) Assuming exercise by the counter-party at the expiration date, the Company would exchange US dollars for Canadian or Australian dollars at the put exchange rate. The counter-party would be expected to exercise the option if the spot exchange rate was below the put exchange rate. (2) Assuming exercise by the Company at the expiration date, the Company would exchange US dollars for Canadian or Australian dollars at the call exchange rate. The Company would exercise the option if the spot exchange rate was above the call exchange rate. (3) Assuming exercise by the Company at the expiration date, the Company would exchange US dollars for Canadian or Australian dollars at the put exchange rate. The Company would exercise the option if the spot exchange rate was below the put exchange rate.
Gold and Silver Contracts The Company's operations are affected significantly by the market price of gold. Gold prices are influenced by numerous factors over which the Company has no control, including expectations with respect to the rate of inflation, the relative strength of the United States dollar and certain other currencies, interest rates, global or regional political or economic crises, demand for gold for jewelry and industrial products, and sales by holders and producers of gold in response to these factors. Homestake's current hedging policy provides for the use of forward sales contracts to hedge up to 30% of each of the following ten year's expected annual gold production, and up to 30% of each of the following five year's expected annual silver production, at prices in excess of certain targeted prices. The policy also provides for the use of combinations of put and call option contracts to establish minimum floor prices. 10 Homestake Mining Company and Subsidiaries At June 30, 1999 the Company had gold forward sales and option contracts outstanding as follows:
Expected Maturity or Transaction Date ------------------------------------------------------------------------- There- Total or 1999 2000 2001 2002 2003 after Average ------------ ------------ ----------- ---------- ---------- ------------ ------------ US $ denominated contracts: Forward sales contracts: Ounces 54,960 85,080 95,000 95,000 75,000 - 405,040 Average price ($ per oz.) $419 $430 $441 $457 $481 - $447 Put options owned: Ounces 140,000 30,000 - - - - 170,000 Average price ($ per oz.) $282 $350 - - - - $294 Call options written: Ounces - 15,000 - - - - 15,000 Average price ($ per oz.) - $395 - - - - $395 Australian $ denominated contracts: (1) Forward sales contracts: Ounces - 24,800 24,800 24,800 24,800 50,800 150,000 Average price (US$ per oz.) - $346 $346 $346 $346 $346 $346 Put options owned: Ounces 60,000 120,000 120,000 - - - 300,000 Average price (US$ per oz.) $333 $342 $352 - - - $344 (1) Expressed in US dollars at an exchange rate of A$ = US$ 0.6576
During the three and six months ended June 30, 1999 and 1998, the Company delivered or financially settled the following:
Three Months Ended Six Months Ended June 30, June 30, ------------------------------ -------------------------------- 1999 1998 1999 1998 -------------- ------------- --------------- ------------- Gold Forward sales contracts Ounces 27,500 85,900 55,000 238,900 Average price (US$ per oz.) $413 $381 $411 $353 Option contracts Ounces 150,000 225,000 180,000 450,000 Average price (US$ per oz.) $293 $325 $297 $325 Silver Option Contracts Ounces 830,000 - 1,585,000 - Average price (US$ per oz.) $6.36 - $6.35 -
11 Homestake Mining Company and Subsidiaries The Company's gold hedging activities increased year-to-date June 30, 1999 revenues by approximately $14 million. In July 1999, the Company closed out US dollar denominated forward sales contracts covering 245,016 ounces maturing in the years 2001, 2002 and 2003. The pretax gain of $35 million realized as a result of this action will be deferred and recorded in income as the originally designated production is sold. 8. Segment Information In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." The Company primarily is engaged in gold mining and related activities. Gold operations are managed and internally reported based on the following geographic areas: United States, Australia and Canada. The Company also has gold operations in Chile, other foreign exploration activities and a sulfur operation in the Gulf of Mexico which are included in "Corporate and All Other." Within each geographic segment, operations are managed on a mine-by-mine basis. However, due to each mine having similar characteristics, the Company has adopted the aggregation approach available under SFAS 131. Segment information for the three and six months ended June 30, 1999 and 1998 is as follows (in thousands):
Corporate United and All Reconciling States Australia Canada Other Items Total -------------------------------------------------------------------- For the three months ended: June 30, 1999 Revenues $ 51,148 $ 61,382 $ 67,012 $27,462 $ (7,664) $ 199,340 Operating earnings (loss) 4,433 7,989 15,838 18,761 (7,664) 39,357 June 30, 1998 Revenues $ 63,578 $ 71,860 $ 51,609 $ 8,946 $ (643) $ 195,350 Operating earnings (loss) 9,672 (5,947) 14,009 (1,892) (643) 15,199 For the six months ended: June 30, 1999 Revenues $ 93,997 $ 125,734 $ 125,065 $ 43,856 $ (10,698) $ 377,954 Operating earnings (loss) 7,851 21,366 33,263 25,740 (10,698) 77,522 June 30, 1998 Revenues $ 126,638 $ 145,818 $ 113,702 $ 26,907 $ (1,473) $ 411,592 Operating earnings (loss) 17,176 (360) 37,914 6,537 (1,473) 59,794
12 Homestake Mining Company and Subsidiaries 9. Contingencies Environmental Contingencies The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") imposes heavy liabilities on persons who discharge hazardous substances. The Environmental Protection Agency ("EPA") publishes a National Priorities List ("NPL") of known or threatened releases of such substances. Grants: Homestake's former uranium millsite near Grants, New Mexico is listed on the NPL. The total future cost for reclamation, remediation, monitoring and maintaining compliance at the Grants site is estimated to be approximately $14 million. Pursuant to the Energy Policy Act of 1992, the United States Department of Energy ("DOE") is responsible for 51.2% of past and future costs of reclaiming the Grants site in accordance with Nuclear Regulatory Commission license requirements. Through June 30, 1999 Homestake had received $27.7 million from the DOE and the accompanying balance sheet at June 30, 1999 includes an additional receivable of $6 million for the DOE's share of reclamation expenditures made by Homestake through 1998. Homestake believes that its share of the estimated remaining cost of reclaiming the Grants facility is fully provided in the financial statements at June 30, 1999. In 1983, the State of New Mexico made a claim against Homestake for unspecified natural resource damages resulting from the Grants tailings. New Mexico has taken no action to enforce its claim. Whitewood Creek: Deposits of tailings along an 18-mile stretch of Whitewood Creek formerly constituted a site on the NPL. Whitewood Creek was a site where mining companies operating in the Black Hills of South Dakota, including Homestake, placed mine tailings beginning in the nineteenth century. Some tailings placed in Whitewood Creek eventually flowed into the Belle Fourche River, the Cheyenne River and Lake Oahe. Homestake ceased the placement of mine tailings into Whitewood Creek in 1977 and for more than 21 years the Homestake mine has impounded all mine tailings that are not redeposited in the mine. The site was deleted from the NPL in 1996. In September 1997, the State of South Dakota filed an action against Homestake, alleging that Homestake's disposal of mine tailings in Whitewood Creek resulted in injuries to natural resources in Whitewood Creek and downstream receiving waters. The complaint also contained a pendent state law claim, alleging that the tailings constitute a continuing public nuisance. The complaint asks for abatement of the nuisance, damages in an unascertained amount, litigation costs and interest. In November 1997, the United States government and the Cheyenne River Sioux Tribe (the "Federal Trustees") filed a similar action alleging injuries to natural resources and seeking response costs, damages in unspecified amounts, litigation costs and attorneys fees. In its answers, Homestake denies that there has been any continuing damage to natural resources or nuisance as a result of the placement of tailings in Whitewood Creek. Homestake has also counterclaimed against the State of South Dakota and the Federal Trustees seeking cost recoupment, contribution and indemnity. 13 Homestake Mining Company and Subsidiaries Homestake, the State of South Dakota and the Federal Trustees engaged in settlement discussions with respect to these actions and a global settlement has been reached among the parties. The settlement agreement provides for Homestake to pay $4 million to be shared equally among the United States government, the State of South Dakota and the Cheyenne River Sioux Tribe (the "Tribe") and used for natural resource restoration. Additionally, it provides for Homestake to deed 400 acres of land to the Tribe for noncommercial use, provide $500,000 to the Tribe for environmental monitoring on the reservation and to assign certain water rights to the State of South Dakota. The United States government will receive $500,000 for damage assessment costs and a land exchange for Bureau of Land Management land believed to be impacted by mine tailings. In exchange for the covenants and releases provided to Homestake by the trustees, all of Homestake's counterclaims will be dismissed. Homestake accrued the estimated cost of the settlement agreement in the third quarter of 1998. A proposed Consent Decree settling federal, state and tribal natural resource damage claims for tailings released from Homestake's mining operations was lodged with the United States District Court for the District of South Dakota on July 9, 1999. Other Contingencies In addition to the above, the Company is party to legal actions and administrative proceedings and is subject to claims arising in the ordinary course of business. The Company believes the disposition of these matters will not have a material adverse effect on its financial position or results of operations. 10. Homestake Canada Inc. ("HCI") On December 3, 1998 Homestake completed the acquisition of the 49.4% of Prime Resources Group Inc. ("Prime") it did not already own. The acquisition was accounted for as a purchase. Under the Plan of Arrangement, Prime shareholders had the option of receiving 0.74 of a Homestake common share or 0.74 of an HCI exchangeable share for each Prime share. Each HCI exchangeable share is exchangeable for one Homestake common share at any time at the option of the holder and has essentially the same voting, dividend (payable in Canadian dollars), and other rights as a Homestake common share. A share of special voting stock was issued to Montreal Trust Company of Canada, in trust for the holders of the HCI exchangeable shares, and provides the mechanism for holders of HCI exchangeable shares to receive voting rights in Homestake. Homestake owns all of HCI's common shares outstanding. At June 30, 1999, approximately 7 million HCI exchangeable shares outstanding were held by the public. On April 29, 1999, Homestake Mining Company issued common stock in exchange for the common stock of Argentina Gold, a publicly-traded Canadian exploration company, in a business combination accounted for as a pooling of interests. The investment in Argentina Gold was then transferred to HCI in exchange for a Canadian dollar-denominated intercompany note payable by HCI to its parent company of approximately C$282 million (US$191 million). In accordance with United States generally accepted accounting principles, the assets, liabilities and shareholders' equity of Argentina Gold have been recorded in HCI's financial statements at the historical cost basis to the parent company. The difference between the historical cost basis of Argentina Gold shareholders' equity and its fair value at the date of transfer has been recorded as a reduction to HCI's shareholders' equity. 14 Homestake Mining Company and Subsidiaries Summarized consolidated financial information for HCI, including Argentina Gold for all periods presented, is as follows:
June 30, December 31, 1999 1998 ------------- ------------- Current assets $ 51,367 $ 151,593 Noncurrent assets 523,735 526,463 ------------- ------------- Total Assets $ 575,102 $ 678,056 ============= ============= Notes payable to the Company $ 323,922 $ 144,002 Other current liabilities 21,772 41,839 Long-term debt 101,902 - Other long-term liabilities 14,621 15,882 Deferred income and mining taxes 209,702 193,074 Redeemable preferred stock held by the Company - 36,167 Shareholders' equity: HCI shareholders' equity 94,055 247,092 Adustment to conform to the Company's accounting basis (190,872) - ------------- ------------- Total Liabilities and Shareholders' Equity $ 575,102 $ 678,056 ============= =============
Three Months Ended Six Months Ended June 30, June 30, ---------------------------------- ---------------------------------- 1999 1998 1999 1998 --------------- -------------- --------------- --------------- Total revenues $ 68,032 $ 51,674 $ 126,031 $ 113,792 Costs and expenses 64,079 54,376 113,778 97,164 --------------- -------------- --------------- --------------- Income (loss) before taxes and minority interests $ 3,953 $ (2,702) $ 12,253 $ 16,628 =============== ============== =============== =============== Net loss $ (1,559) $ (10,841) $ (755) $ (6,937) =============== ============== =============== ===============
15 Homestake Mining Company and Subsidiaries SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HOMESTAKE MINING COMPANY Date: November 16, 1999 By /s/ David W. Peat --------------- ----------------- David W. Peat Vice President, Finance and Chief Financial Officer Date: November 16, 1999 By /s/ James B. Hannan --------------- ------------------- James B. Hannan Vice President and Controller (Chief Accounting Officer) 16 -----END PRIVACY-ENHANCED MESSAGE-----